What did Elon Musk say about the high interest rates in the US?
Tesla CEO Elon Musk shared what he hopes are his “paranoid” views on the economy as Americans struggle with paying bills in a high-interest environment.
Elon Musk spoke to investors during an earnings call on Wednesday after Tesla reported its third-quarter results which underperformed expectations. The electric-vehicle manufacturer missed Wall Street forecasts for both earnings and revenue, the first time since the second-quarter of 2019.
Tesla’s stock rose initially after the report but then sank upon hearing the billionaire’s pessimistic outlook on the economy and what it could mean for the company along with a forewarning that the Cybertruck might not deliver significant positive cashflow for up to a year and a half. Particularly, he said that he’s “worried about the high interest rate environment we’re in.”
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What did Elon Musk say about the high interest rates in the US?
“A lot of - a large number of people are living paycheck-to-paycheck,” Musk said on the earnings call. “And with a lot of debt. They’ve got credit card debt, mortgage debt. So, yes, that’s reality for most people.”
“I am worried about the high interest rate environment that we’re in. I just can’t emphasize this enough, that the vast majority of people buying a car is about the monthly payment. And as interest rates rise, the proportion of that monthly payment that is interest increases naturally.”
“If interest rates remain high or if they go even higher, it’s that much harder for people to buy the car,” said Musk. He also expressed concern about the availability of credit for consumers in light of the bank failures this year. “A lot of regional banks died, and I mean, even Credit Suisse, I mean, geez, that was a shocker.”
Credit card interest rate are “usurious” and “punishing”
“That’s mind-blowing. And I think there’s still quite a few shoes to drop on the bad credit situation,” Musk extrapolated. “I mean, commercial real estate obviously is in terrible shape. Credit card debt has been rising significantly.”
On the last point he called credit card interest rates “usurious” and said that over time such high interest rates become “obviously extremely punishing” and could mean that those racking up credit card debt might not be able to pay them off.
“You can’t pay them off and you’re still accruing interest of 20%, you’re at best headed to a bad place,” said Musk. All this could spell bad news for the car industry as well.
“I apologize if I’m perhaps more paranoid than I should be because that might also be the case because I am - I have PTSD from 2009 big time,” said the Tesla CEO. He shared how last minute financing kept the company going through that perilous year but “barely.”
“We’re not going to sink. But even a great ship in a storm has challenges,” added Musk. “Now, that storm will apply to everyone, not just us and not just the auto industry. It will apply to everyone, I think.”